Morneau: Ottawa not into pipelines permanently
OTTAWA — The federal government has no plans to drag Canada permanently into the pipeline business, Finance Minister Bill Morneau said Tuesday as he unveiled a $4.5-billion plan to buy the Trans Mountain pipeline and its various assets to ensure a planned expansion is able to proceed.
If Canada indeed ends up buying the pipeline, it will be solely to ensure its capacity can be tripled, allowing Canada to find new export markets for its oil resources, Morneau said — and that ultimately, the long-term goal will be to find a private-sector buyer to take it over.
“The Trans Mountain expansion project is of vital interest to Canada and to Canadians,” Morneau told a news conference in Ottawa.
“Our government’s position is clear: it must be built, and it will be built.”
Morneau said the government’s hand was forced by B.C. Premier John Horgan, who has gone to court for judicial approval to regulate what can flow through the pipeline — a measure of opposition that made Kinder Morgan Canada, the project’s original owner, too nervous to continue.
The company halted all nonessential spending on the pipeline expansion in April pending reassurances from Ottawa that the project would come to fruition. Morneau had said Canada would cover any cost overruns caused by B.C.’s actions, but in the end, that wasn’t enough.
“We need to deal with the political uncertainty,” he said. “The only [way] in our estimation that that can be done is through exerting our jurisdiction by purchasing the project.”
Kinder Morgan agreed to start construction this summer as planned, and will work until July 22 trying to find another private-sector buyer. If none comes forward, Kinder Morgan will take Ottawa’s $4.5-billion offer to its shareholders.
Pending their approval, the sale would be finalized sometime in August or September.
The purchase price includes most of Kinder Morgan Canada’s core assets — the existing pipeline, the pumping stations and rights of way, and the Westridge marine terminal in Burnaby.
That terminal is where the diluted bitumen from the pipeline would be loaded onto tankers and shipped out to sea, with the goal being to sell Canadian oil in Asia.
The pipeline purchase would also transfer to the federal government all of the people involved in building the expansion, including project managers and construction workers. Canada would then proceed with construction, selling the pipeline when it would generate the best return.
There are parties interested in the pipeline, including Indigenous communities and pension funds, Morneau said, but his officials acknowledged it might be hard to find a buyer amid lingering uncertainty until after the pipeline is actually built.
If Canada takes on the project, Export Development Canada would finance it through a newly established Crown corporation — an approach officials say would help to defray B.C.’s threats of delay. Existing statutes stipulate one level of government cannot interfere with the work of another — a situation one official called a “conversation changer” that might convince B.C. to back down.
Morneau stressed repeatedly the pipeline is commercially viable and profitable. Kinder Morgan makes about $200 million a year from selling space in the existing pipeline to oil companies to ship their product.
The $4.5-billion purchase price does not cover the construction costs of building the new pipeline, however; Morneau refused to say what that cost may be. Kinder Morgan last year said it was about $7.4 billion, plus about $1 billion already spent — an estimate that’s now considered low.